Inner east underperforms while nearby suburbs boom at auction

Melbourne’s weekend auction market got away to an early start as a house in Toorak sold for $6.6 million before its scheduled auction.

RT Edgar found a ready buyer for the elegant five-bedroom Edwardian home on a 1195-square-metre block at 659 Orrong Road, with the property changing hands on Tuesday.

The house, which has a broad 21.7-metre frontage and redevelopment potential, was earlier sold 10 months ago for $6 million and, in 2001, for $1.45 million.

Elegant: 659 Orrong Road, Toorak sold for $6.6 million before its scheduled auction.

The latest transaction is a pointer to the fulsome demand for A-grade properties in good locations, but some observers say prices for B and C-grade inner-suburban homes are now pulling back.

On Saturday, the Domain Group reported a strong Melbourne auction clearance rate of 76 per cent. This was based on 782 results reported by agents. Some 11 properties were withdrawn from sale and the results of a further 242 scheduled auctions were not reported.

The weekend clearance rate was higher than the 74.3 per cent recorded on the previous weekend but below the 79 per cent reported over the same weekend last year.

Period house: 28 Connell Street, Hawthorn passed in at $1.75 million at auction on Saturday.

Despite the generally robust trading conditions, the inner east is continuing to underperform.

This region taking in the leafy Boroondara and Stonnington council areas, was widely seen as the engine room for Melbourne’s housing growth spurt between 2012 and early 2017. But on Saturday it languished with a regional clearance rate of just 60.2 per cent.

By contrast the south east region recorded a top clearance rate of 86.7 per cent. Not far behind was the inner city with 85.5 per cent. It was followed by the north with 80.3 per cent, the outer east with 80.2 per cent, the inner south with 79.0 per cent, the west with 77.3 per cent and the north east with 72.9 per cent.

Development potential: 31 Major Road, Fawkner has recently been approved for a three townhouse development and sold for $840,000 on Saturday.

The Domain Group’s chief economist Andrew Wilson said the market was seeing consistent “very big” results in the south eastern suburbs.

“But the inner east recorded its second lowest clearance rate for the year and that is a market that looks like it has run out of puff,” he added.

Buyers advocates Woledge Hatt reported at the weekend that a period house with three bedrooms at 28 Connell Street, Hawthorn, attracted just one bidder and no sale. Fletchers opened the bidding with a $1.7 million vendor bid and the property, in one of West Hawthorn’s better streets, was passed in at $1.75 million.

Three bidders: 39 Llaneast Street, Armadale sold for $1,895,000 on Saturday.

There was more to crow about in Armadale. Here another compact period home was offered to the market by Marshall White.

Number 39 Llaneast Street, Armadale, opened on $1.6 million. It was on the market at $1.88 million with three bidders and sold for $1,895,000.

The most expensive property reported sold at auction was a four-bedroom home at 307 Beaconsfield Parade, Middle Park. The waterfront listing drew three bidders and sold for $6.37 million to a buyer who intends to upgrade the home. Listing agency Greg Hocking said the property was on the market at $6 million.

This new four-bedroom house at 26A Fenwick Street, Clifton Hill passed in at $1.85 million at auction on Saturday.

Land with development potential was keenly sought. Advantage Property Consulting reported that a 560-square-metre site at 31 Major Road, Fawkner, drew bids from seven developers. The corner property, which was recently approved for a three-townhouse redevelopment, was on the market at $800,000 and sold for $840,000.

He said four or five months ago single-fronted terraces were walking out the door with four or five people competing for them: “But the bidder depth for these properties has dropped away and they have come back to value. Certainly, the prime properties are still firing and their prices have not dropped, but anything that is sub-par has probably fallen back by 10 per cent since four or five months ago.”

Despite the recent softening in auction clearances and in the rate of house price growth, it isn’t clear whether Melbourne’s market is going through a cyclical change or catching its breath after the boom-time market that has run since 2012.

Much depends on the direction of official interest rates, the housing market’s key trigger.

Reserve Bank governor Philip Lowe has signalled that the next move in the cash rate is more likely to be up than down, although plenty of real estate analysts predict there could be a rate reduction or at least a sustained period of unchanged rates.

Mr Osborne said the Sydney and Melbourne residential property markets shared similarities with markets in large Canadian cities.

“The Vancouver and Toronto property markets have been impacted as interest rates have headed up,” he said.

“Prices have started to fall quite noticeably in Vancouver and Toronto. It is hard to know whether that is where we are heading or whether we are just going to track sideways for a period of time.”

Mr Osborne suspects that prices for some B and C-grade properties in the inner suburbs of Sydney and Melbourne could pull back by more than 10 per cent in the coming months: “Confidence is a little more fickle than it has been in the past, so you start to see a bit more failure at auction. Then the buyers are looking at these failed auctions and are thinking: ‘Well, maybe we need to revisit what we are prepared to pay for a property.’ It is a vicious circle.”